Correlation Between Vanguard High and Defiance Large

Can any of the company-specific risk be diversified away by investing in both Vanguard High and Defiance Large at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard High and Defiance Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard High Dividend and Defiance Large Cap, you can compare the effects of market volatilities on Vanguard High and Defiance Large and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard High with a short position of Defiance Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard High and Defiance Large.

Diversification Opportunities for Vanguard High and Defiance Large

0.35

Correlation Coefficient

Vanguard High  Defiance Large

Weak diversification

The 3 months correlation between Vanguard and Defiance is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard High Dividend and Defiance Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Large Cap and Vanguard High is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard High Dividend are associated (or correlated) with Defiance Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Large Cap has no effect on the direction of Vanguard High i.e., Vanguard High and Defiance Large go up and down completely randomly.

Pair Corralation between Vanguard High and Defiance Large

Considering the 90-day investment horizon Vanguard High Dividend is expected to under-perform the Defiance Large. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard High Dividend is 1.12 times less risky than Defiance Large. The etf trades about -0.08 of its potential returns per unit of risk. The Defiance Large Cap is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,040  in Defiance Large Cap on September 14, 2024 and sell it today you would lose (15.00) from holding Defiance Large Cap or give up 0.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vanguard High Dividend  vs.  Defiance Large Cap

Vanguard High Dividend

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard High Dividend are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard High is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Defiance Large Cap

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Large Cap are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Defiance Large is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard High and Defiance Large

The main advantage of trading using opposite Vanguard High and Defiance Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard High position performs unexpectedly, Defiance Large can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Defiance Large will offset losses from the drop in Defiance Large's long position.

The idea behind Vanguard High Dividend and Defiance Large Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.